Patent law - divided infringement of method claims: Federal Circuit broadens direct infringement liability, retains single entity restriction - Akamai Technologies, Incorporated v. Limelight Networks, Incorporated.

• Author: Mikaelian, Tsoline

Patent Law--Divided Infringement of Method Claims: Federal Circuit Broadens Direct Infringement Liability, Retains Single Entity Restriction-- Akamai Technologies, Incorporated v. Limelight Networks, Incorporated, 797 F.3d 1020 (Fed. Cir. 2015).

Infringement of patent claims is a statutory tort. (1) The United States Code governs direct infringement under 35 U.S.C. [section] 271(a), which encompasses infringement of both apparatus and method claims. (2) Infringement of a method claim requires its use by the performance of each step of the claimed method. (3) In Akamai Technologies, Inc. v. Limelight Networks, Inc., (4) the Court of Appeals for the Federal Circuit addressed the issue of liability for divided infringement of method claims. (5) Specifically, the court addressed whether a defendant, in an arms-length relationship with a third party, can be liable for direct infringement when it performs some steps of a method claim and the third party performs the remainder of the steps. (6) The court held the defendant liable for direct infringement because the third party's actions are attributable to the defendant, but the court also maintained that only single entities can be liable for direct infringement. (7)

In 2006, Akamai Technologies, Inc. (Akamai) and the Massachusetts Institute of Technology (MIT) filed a patent infringement action against Limelight Networks, Inc. (Limelight). (8) The lawsuit included allegations of infringement of U.S. Patent No. 6,108,703 ('703 patent), assigned to MIT and exclusively licensed to Akamai. (9) Method claims of the '703 patent comprise steps for faster delivery of content over the Internet via a content delivery network (CDN), and involve "tagging" selected content for delivery via the CDN rather than via a content provider's servers. (10) At trial, a jury found that Limelight infringed claimed methods of the '703 patent in collaboration with its content provider customers who performed the "tagging" step. (11) Following this verdict, the Court of Appeals for the Federal Circuit held in another case that a method claim can be directly infringed only when all of its steps are performed by or attributable to a single entity, excluding "arms-length collaboration" from the scope of direct infringement liability. (12) In view of this single-entity restriction and limited attribution theory shielding arms-length seller-customer relationships, the district court granted Limelight's motion for judgment of noninfringement as a matter of law. (13)

On appeal, a Federal Circuit panel decision affirmed that Limelight is not liable for direct infringement because it did not perform all steps of the claimed methods, and the "tagging" step Limelight's customers performed is not attributed to Limelight. (14) The Federal Circuit sitting en banc, however, reversed the panel's decision, reasoning that although Limelight and its customers did not directly infringe under 35 U.S.C. [section] 271(a), Limelight may be liable for induced infringement under 35 U.S.C. [section] 271(b). (15) The United States Supreme Court granted certiorari and held that there cannot be liability for induced infringement under Section 271(b) when no one has directly infringed under Section 271(a) or any other statutory provision. (16) The Supreme Court, however, did not review the merits of who may directly infringe, suggesting that the Federal Circuit may revisit the scope of Section 271(a). (17)

Upon remand from the Supreme Court, a divided Federal Circuit panel decided that Limelight did not directly infringe the '703 patent. (18) The majority defended the single-entity restriction under Section 271(a) and reasoned that a customer's actions may not be attributed to Limelight because attribution is limited to agency relationships, contractual agreements to perform, and joint enterprises. (19) By contrast, the dissent argued that Section 271(a) encompasses joint tortfeasor liability. (20) The dissent criticized the majority rule because it leaves a "gaping hole" that allows parties to evade liability for infringement of method claims by dividing infringement among multiple parties in arms-length relationships. (21) On August 13, 2015, the en banc Federal Circuit reversed the panel decision and reinstated the jury verdict that held Limelight liable for direct infringement; this decision expanded the scope of Section 271(a) based on the theory of attribution yet retained the single-entity rule. (22)

The Patent Act of 1952 defined direct infringement in Section 271(a) and codified indirect infringement through the doctrines of induced and contributory infringement in Sections 271(b) and 271(c), respectively. (23) The language of Section 271 does not explicitly distinguish between apparatus and method claims. (24) As applied to infringement of method claims, the language of Section 271(a) has been construed to require the use of the method by performing each of the method's steps within the United States. (25) The issue of "whoever" may infringe a method claim as recited in 35 U.S.C. [section] 271(a), however, has been debated. (26) In contrast to apparatus claims where direct infringement may always be attributable to a single entity, performance of method claims may be divided among multiple parties, giving rise to the issue of liability under divided infringement. (27)

In BMC Resources, Inc. v. Paymentech, L.P., (28) the Federal Circuit decided direct infringement requires holding a single entity responsible for the performance of each element of the claimed method. (29) If a defendant participates in infringement without directly infringing the patent, indirect infringement under Sections 271(b) and 271(c) may apply. (30) Indirect infringement, however, requires direct infringement under Section 271(a) to occur, thereby ultimately importing the single-entity requirement of direct infringement into any showing of indirect liability. (31) To address the loophole that allows a party to escape infringement liability by having a third party perform one or more steps of the claimed method, courts have utilized the principle of vicarious liability. (32) In Muniauction, Inc. v. Thomson Corp., (33) the Federal Circuit held that in a divided infringement scenario, a method claim is directly infringed under Section 271(a) "only if one party exercises 'control or direction' over the entire process such that every step is attributable to the controlling party, i.e., the 'mastermind.'" (34) Further, the court explicitly excluded "arms-length cooperation" of multiple parties from the scope of direct infringement liability, which did not completely patch the divided infringement loophole. (35)

The "direction or control" standard is based on vicarious liability of one party for the acts of another. (36) The standard, however, was often limited to agency relationships and contractual relationships where one party is obligated to perform at least one step of a claimed method. (37) For example, in Golden Hour Data Systems, Inc. v. emsCharts, Inc.,38 the Federal Circuit affirmed application of the rules promulgated in BMC and Muniauction, finding no direction or control, and no vicarious liability, when parties formed a "strategic partnership" and collaborated to practice a patented method. (39) Subsequently, in an opinion that conflicts with Golden Hour, the Federal Circuit described a joint enterprise as a form of mutual agency included within the scope of vicarious liability. (40)

In Akamai Technologies, Inc. v. Limelight Networks, Inc., the Federal Circuit affirmed the single-entity rule for divided infringement, and identified "direction or control" and joint enterprise as two distinct categories of vicarious liability. (41) The court reasoned that this rule is most consistent with the language of Section 271(a), the statutory context, legislative history, and established precedents. (42) In establishing joint enterprise liability, the court explicitly overruled the conflicting aspects of Golden Hour. (43) Further, the court expanded the "direction or control" test beyond agency and contractual relationships to encompass any situation that involves both conditioning participation or a benefit upon the performance of a step, and establishing the manner or timing of performance. (44) The court applied the expanded "direction or control" standard to find Limelight vicariously liable for direct infringement because Limelight...